ABSTRACT
Events of the last two years have shifted the spotlight of public attention in many countries onto the framework for setting monetary policy. The sudden collapse of exchange-rate pegs in several Asian countries in 1997 demonstrated the fragility of frameworks that rely on an exchange-rate anchor for inflation control in today’s world of massive private capital flows. Financial ruptures in Indonesia, and subsequently Russia, eroded public faith in the ability of bankers to protect the value of their money and in the safety of their savings. Meanwhile, in Europe in January 1999, 11 countries moved to unite their currencies into a single new entity, the euro, managed by a new European Central Bank (ECB).
